Considering the never-ending gun violence in or nearby American shopping malls, I’m a little skeptic about this Axios article.
Perhaps, the retail apocalypse predictions ignored business shifts. The article below confirms this shift: “Shopping centers became more diverse — there are medical offices, gyms, day care centers, and pickleball.”
In the Netherlands, there has been a clear shift reflecting ageing demographics. Suddenly, there were plenty of new retail outlets focussing only on senior citizens, especially on hearing aids.
Dutch municipalities are now considering to convert abundant vacant retail outlets into residential housing because those retail vacancies appear to be permanent rather than temporary.
To a large extent, those vacant retail outlets used to be residential houses about 50-100 years ago.
The retail apocalypse never happened (Axios Markets)
“A good retail space is getting harder to find with the vacancy rate for shopping centers nationwide at a 15-year low, Emily writes.
Why it matters: The COVID-era doomsday predictions were wrong.
What they’re saying: We haven’t seen the apocalypse everyone was expecting, Thomas LaSalvia, head of commercial real estate economics at Moody’s Analytics, tells Axios.
- Retail commercial real estate is “back for good,” per a recent report from Cushman & Wakefield, a real estate services firm.
By the numbers: The vacancy rate at U.S. shopping centers — essentially any retail spaces outside the mall — fell to its lowest level since Cushman began tracking in 2007.
- Average asking rents in the sector were 4.1% higher in Q4 compared with a year earlier. They’re up 17% cumulatively from 2019, and 41% over the past decade, per Cushman.
Zoom out: Demand for retail space stayed strong overall in 2023 thanks to a growing economy and strong labor market that kept Americans shopping. Retail sales were up 3.2% in 2023 from the previous year.
The big picture: The retail landscape is always evolving to adjust to changing tastes, spending habits and trends — from Main Street to shopping malls to big box and back again.
- The sector ran a gauntlet of store closures and bankruptcies as it faced web competition — and then COVID hit, leading to worries it would never recover.
- At the time landlords offered big concessions to some retail tenants to keep storefronts filled. Those deals are largely gone.
- That’s meant depressed levels of retail construction for the past decade. “Lack of new retail construction has kept a ceiling on the vacancy rate since the start of the pandemic,” per the Cushman report.
Context: Last year just 8 million square feet of new retail space was constructed — that’s compared to about 20 million in 2019.
- Even those numbers are small compared to a decade ago. From 2008-2014, new construction averaged nearly 40.8 million square feet per year, per Cushman.
What’s emerged is a more resilient landscape. These days e-commerce and physical retail now complement each other. Opening a brick-and-mortar store can even increase a brand’s online sales, according to a study from late last year. Closing a store has the opposite effect.
Meanwhile: Shopping centers became more diverse — there are medical offices, gyms, day care centers, and pickleball.
Between the lines: Retail’s evolution may hold lessons for what’s happening in the office market, which is struggling to adapt to a remote-friendly work world.
- Landlords might need to get flexible with all those empty offices, some of them might go away entirely or get converted to residential buildings or transform into a new mixed-use situation.
- It took more than a decade for retail to adapt to a new era, it’s reasonable to assume the office market will need a similar amount of time.”
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